An All-Equity Financed Firm Has $45,000 in Assets and the Stock

question 28

Multiple Choice

An all-equity financed firm has $45,000 in assets and the stock price is $10. If the firm restructures with 30 percent debt which creates interest expense of $810 per year and the firm's tax rate is 28 percent, what is the break-even EBIT?

• A)$1967
• B)$1157
• C)$2700
• D)$1500

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Definitions:

Goals

The targets or outcomes that an individual, group, or organization aims to achieve over a specific period.

Operating Budget

A detailed projection of all anticipated income and expenses based on forecasted sales revenue during a certain period, usually one fiscal year.

Allocating Equipment

The process of distributing machinery, tools, or devices to areas or individuals where they are needed, based on an assessment of demand and available resources.

Construction Projects

Structured endeavors with a defined beginning and end, undertaken to create unique products, services, or results in the field of construction.